What’s the story
India‘s corporate bond market is set for a major surge this month, with high-rated companies and banks looking to raise funds.
The trend comes amid falling bond yields and abundant liquidity.
According to traders, Indian firms are likely to raise at least ₹30,000 crore ($3.43 billion) through bonds in the coming three weeks, Reuters reports.
Major players expected to tap corporate bond market
Several major players are expected to tap into the corporate bond market this month. These include Manipal Hospitals, State Bank of India (SBI), IRB Infrastructure Trust, Delhi International Airport, Torrent Investments, Power Grid Corporation of India, and GMR Airports.
Corporate bond market’s record-breaking momentum
The corporate bond market’s popularity is on the rise, especially over traditional bank loans. This is mainly due to favorable rate conditions.
Between April and July, firms raised a record ₹4.07 trillion through bonds, according to Prime Database.
Pranav Haldea, Managing Director at Prime Database Group, said they expect this trend to continue with fundraising hitting another record this year.
Faster rate transmission makes corporate bonds appealing
The Reserve Bank of India (RBI)‘s 100-basis-point rate cut between February and June, along with large liquidity infusions, has made bond markets more attractive than bank lending.
Vinay Pai, Head of Fixed Income at investment banking firm Equirus Capital, said, “Rate transmission in the bond market is faster as it discounts rate expectations.”
This makes corporate bonds an appealing alternative for companies seeking cheaper financing options.
Shift toward corporate bonds as preferred financing option
According to a report by the SBI, the incremental share of bank credit in overall resource mobilization has been declining.
It fell to 31.3% in FY24 and 22% in April-June, down from 44.6% in FY23.
This trend further highlights the shift toward corporate bonds as a preferred financing option for companies amid changing market conditions.